Source: New Zealand Institute of Chartered Accountants – Why Chartered Accountants don’t think much of current domestic tax transparency legislation
Although it is unclear what criteria will be used to exclude private companies, Chartered Accountants Australia and New Zealand has reiterated its concerns about the disclosure legislation as currently enacted. This legislation requires the ATO to report information about corporate tax entities with a total income of $100 million or more. Their total income, taxable income and income tax payable must be published.
CA ANZ continues to raise concerns that the measures do not achieve their stated policy purposes of discouraging aggressive tax avoidance practices and enabling the public to better understand each company’s tax affairs.
In a tax reform context, the information is likely to cloud the debate about what company tax base and rate an open economy like Australia needs if we are to attract investment and jobs to our shores.
Michael Croker, the Head of Tax at CA ANZ, said a company cannot be judged simply on the basis of the tax it pays.
“The ATO already holds detailed information about each large company’s tax affairs. Public disclosure seems more about naming and (possibly) shaming without acknowledging the key issue which the ATO focuses on: ‘Has this company paid the correct amount of tax according to the law?’
“Those concerned about international tax planning undertaken by multinationals will learn little from the domestic disclosure rules about the complex world in which such companies operate. Much more is to be gained from Australia recently signing up to enhanced tax data sharing as part of the OECD’s Base Erosion and Profit Shifting project and expanded intelligence sharing arrangements between the ATO and tax authorities in other jurisdictions,” he said.
Chartered Accountants Australia and New Zealand notes that:
- The domestic tax transparency measures impact all large companies: they make no distinction between those with domestic and international activities, public or private. Reports that private companies may be excluded are therefore welcome. The publication of private company tax data raises legitimate concerns about shareholder rights to privacy and the differential treatment of private companies vis-a-vis other business structures, such as partnership and trusts.
- The disclosure does not convey the various tax adjustments – legally available under the law to all companies large and small – relevant in arriving at taxable income. There is therefore great potential for misunderstanding and damage to a company’s brand and reputation. For reporting entities, the tax note in the published accounts already provides more detailed information.
- Companies are developing differing responses to the measure: at one extreme, some are developing a detailed communication strategy to convey information about their total tax contribution to Australian society, whilst others are doing nothing, relying instead on the right that every taxpayer has to keep their tax affairs confidential. These diverse outcomes reflect a policy whose objectives were never carefully thought through.